Iran Economy Ministry Priorities Assigned

First Vice President Es’haq Jahangiri has tasked the Ministry of Economic Affairs and Finance with implementing 14 priority projects in the current Iranian year (March 2017-18).

Most of these projects were ratified by the Headquarters of Resistance Economy and initiated during the first tenure of President Hassan Rouhani, but need to be completed.

Resistance Economy refers to a set of principles outlined by the Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei aimed at bolstering domestic production, curbing dependence on oil exports, improving productivity and encouraging Iranians to buy domestically-manufactured products.

 Improving Business Environment  

Iran is ranked 120 among 190 economies in the ease of doing business index, according to the latest World Bank annual ratings.

On average, Iran’s rankings have improved by eight spots annually since 2013, when the country stood at 152nd place.

Jahangiri has urged the Economy Ministry to direct its efforts toward improving the index by 10 spots this year.

Establishment of e-Treasury System

Last year, the government announced measures to transfer its accounts from agent banks to the Central Bank of Iran in cooperation with the Treasury. The measures make up the Electronic Treasury scheme that aims to return the accounts from government and private-owned agent banks to the Treasury.  

In February, Tayyebnia called on deputy economy minister for financial supervision and treasury affairs, Seyyed Rahmatollah Akrami, to pursue the establishment of an electronic treasury management system as well as productive management of government assets, referring to them as two key projects on the ministry’s agenda.

Once again, Jahangiri has referred to the establishment of e-treasury as one of the main priorities of the government.

 Completion of Privatization Process

The privatization of public economic entities includes three stages: pricing the entities, transferring them to real private sector and readying the remaining entities for transfer.

The first vice president has called for the completion of the privatization process.

Wider Execution of VAT

According to Iran National Tax Administration, value added tax accounts for 50% or 1,700 trillion rials ($45.04 billion) of government revenues and the administration pays over 600 trillion rials of VAT revenues to municipalities and 50 trillion rials to the Health Ministry for the Healthcare Reform Plan.

The VAT Law, which took effect in the Iranian year to March 2009, is being extended every year. VAT currently stands at 9% in Iran.

Jahangiri wants a wider implementation of VAT in economic sectors.

 Integrated Taxation System

The government piloted its newly-drafted Integrated Taxation System in Tehran, Isfahan and Kermanshah last year and plans to implement the system in other provinces. The new code overhauls tax exemptions, adds new taxpayers and controls evasions.

According to Tayyebnia, in the new tax code, manufacturing activities get new exemptions to boost investment in the real economy and help economic recovery.

“Tax breaks given to many companies have been cut in the new code and, more importantly, even state-owned institutions that were not under government control will become liable for taxation,” he added.

Government officials have stated on various occasions that over 60% of the Iranian economy are not being taxed, which figure includes estimates of gray market activities.

Tayyebnia is expected to accomplish the integration of the taxation system to make it more equitable and effective.

Asset Management

The government is intent on identifying its assets across the country to make the most of them. To this end, as many as 270,000 immovable properties were recorded in the fiscal 2015-16.

The number of government vehicles saw a 70% decline to stand at 120,000. Currently, 38,588 estates have been identified, of which 6,672 belong to national organizations, 24,909 to provincial organizations and 7,007 are at the disposal of state companies.

One of the government's priorities is to complete the evaluation of all assets in order to sell off the unused assets and make the productive use of others.

 Improving Competitiveness Index

One of the main achievements of the government of President Hassan Rouhani so far was a nine-point rise in Iran’s Competitiveness Index in the fiscal 2015-16 to rank 74th.

The World Economic Forum reports on competitiveness index every year and Jahangiri has urged the Economy Ministry to prioritize the improvement of this index.

 Downsizing the Government

The Rouhani administration has put in a convincing performance in privatizing public entities.

According to Mir Ali Ashraf Abdollah Pouri-Hosseini, the head of Iranian Privatization Organization, the remaining 323 out of the 1,713 enterprises on the privatization list will be ceded in the current Iranian year.

Figures show that since 2001 (the year IPO was founded), over 1,400 trillion rials ($37.33 billion) of public assets were handed over to private owners, 40% of which were transferred during the Rouhani administration's first tenure.

As underscored by Jahangiri, this process needs to continue to streamline governance and have an effective state apparatus in place.

 Reducing Gov’t Debts

In January, Tayyebnia revealed that the current level of government and public-sector companies' debts held by contractors and other entities stand at a whopping 6-7 quadrillion rials ($152-177 billion). These debts started to pile up in the early 2010s during Iran’s financial crisis and have been a chief instigator of the economic slowdown.

One of the priorities is to pay off the government's debts completely.

 Fight Against Corruption, Money Laundering

The intergovernmental Financial Action Task Force, which monitors money laundering and terrorism financing worldwide, decided last June to keep Iran on its blacklist of high-risk countries, but welcomed Iranian promises to improve and "suspend counter-measures for 12 months in order to monitor Iran’s progress in implementing the Action Plan”.

Jahangir’s edict is the latest indication of Iran’s determination to quit the blacklist of high-risk countries maintained by FATF.

 Redirecting Cash Subsidies Plan

As part of the so-called “Subsidy Reform Plan”, the administration of former president Mahmoud Ahmadinejad removed subsidies on food and energy in 2010 and instead paid 455,000 rials ($11.9) to all Iranians on a monthly basis.

The Rouhani administration has continued to implement the plan it inherited from the previous government, albeit reluctantly, amid financial constraints exacerbated by plummeting oil revenues.

Nonetheless, the incumbent government has moved to restrict the number of cash subsidy recipients, slowly but steadily.

According to Government Spokesman Mohammad Baqer Nobakht, 4,853,386 people have been removed from the list of cash subsidy recipients as of January 20, 2017.

Jahangiri has now called on the Economy Ministry to design and draft the redistribution of revenues to the needy through the “Subsidy Reform Plan”.

 Introduction of Investment Opportunities In Iran 

Investment, be it domestic or foreign, and gross domestic product of a country are positively correlated.

The sixth five-year development plan (2017-22) has envisioned an average annual economic growth of 8% throughout the period, through attraction of $250 billion in investment, of which $50 billion should be financed by foreign resources.  

Foreign direct investment creates economic growth via know-how transfer, adoption of new technologies and a rise in exports.

The Economy Ministry is now tasked with introducing new policies to increase Iran's GDP by making investment in the country more attractive.

 Empowering Insurance Industry

According to the president of the Central Insurance of Iran, Abdolnasser Hemmati, Iran's insurance industry grew 22% during the year to March 20, 2017, with insurance penetration rate having improved by 0.4% to reach 2.1%.

"Although our insurance penetration rate stands higher than the average in the Middle East and North Africa, it is still below global standards," he added.

Elaborating on the objectives of CII for the current year, Hemmati said they include ratification of corporate governance rules in the first meeting of the High Council of Insurance, the gradual implementation of International Financial Reporting Standards and obligating insurance companies to present their financial statements in the first half of the year in line with the new standards.

Other goals include establishment of the Natural Disaster Insurance Fund, accelerating growth in life insurance, absorbing foreign investment and strengthening the IT sector.

Full Implementation of Sanhab

Jahangiri has also stressed the full implementation of Iran’s electronic insurance supervision platform "Sanhab" (CII's database) and the reinforcement of its infrastructure in the current year.